Reliance Communications to raise call rates in discounted plans

MUMBAI: After increasing call rates, Anil Ambani group company Reliance Communications (RCOM) is now planning to raise tariff of its bulk discounted calling plans, said a senior official of the company.

The company is reducing the available talktime on fixed larger plans and effective rate per minute in a range between 20% and 60%. "The thing to note is that we have not found any change in usage since our last price increase in October," said Gurdeep Singh, chief executive, wireless business at Reliance Communications.

All the company's mobile users have been migrated to the 25% higher headline tariff plan that the company had initiated last year. It was the single-largest tariff hike implemented by the Anil Ambani company and the second bold step taken by the debt-ridden telco after it disconnected phone connections of subscribers who didn't use their phones for two months, resulting in a drop of its customers.

According to the new price revision, people enjoying lower tariffs through bulk plans, or packs as they are called, will now have to pay a higher price. An analyst, who didn't wish to be named, said the increase should add nearly 4-5% to the Anil Ambani flagship company's operating profit.

The previous rise has added around 7% to the profit, but the full impact is realised in the April-June quarter, he added.As in the previous case, Singh said it will take 6 months to migrate all customers to the new tariff plans. RCOM tends to offer among the lowest rates in the industry and has lower average revenue per user than even some of its smaller competitors like Idea Cellular.

However, Singh said the company is now no longer spending too much time on other parameters, and is instead focusing on the profitability per user aspect.

In October, the company had revised its base price to 1.5 paise per second from 1.2 paise. Rivals such as Vodafone, Idea Cellular and Aircel did not respond to ET's email query on whether they too are planning similar hikes.

However, most of them do not have immediate plans to do so. "We have no plans to revise headline tariffs anywhere in India. Reduction of discounts and promotional offers is part of our ongoing strategy," said a Bharti Airtel spokesman.

In mid-2011, mobile phone companies began raising tariffs by about 20%, the first call rate hike after three years of savage price cuts. This process was done in a phased manner and was completed only in March.

Last year, Idea Cellular had raised tariffs by 15-20% in Madhya Pradesh and was slated to extend this to the rest of the country, as the industry tries to enforce price discipline and put the cut-throat competition of 2008-11 behind it.

Bharti and Vodafone have maintained that such increase in rates typically do not improve revenue or profits because they are offset by sporadic offers on other plans. At present, most are offering discounted Internet or data usage plans. The mobile boom of the past decade is primarily attributed to the sharp and continuous fall in call rates.

Two analysts said Reliance Communications can well use the additional income to repay its massive net debt that stood at Rs 37,360 crore at last count.